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Urban Outfitters (URBN) Stock Falls on Weak Holiday Performance

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Shares of Urban Outfitters, Inc. (URBN - Free Report) nosedived roughly 10.3% during the after-market trading session on Jan 12. Disappointing holiday sales numbers primarily weighed on investors’ sentiments. Management also cautioned about weaker-than-expected gross margin for fourth-quarter fiscal 2021.

Over the past three months, this Philadelphia-based company’s shares have gained 27.8% compared to the industry’s 64.5% rally.

Sales Data

Total net sales for the two months ended Dec 31, 2020 tumbled 8.4% from the year-ago period.  Further, comparable Retail segment net sales dropped 9% on account of negative retail store net sales as robust conversion rates were unable to offset the lower store traffic owing to the pandemic and related restrictions. Notably, lower store net sales were partly offset by solid double-digit increase in digital channel sales. By brand, comparable Retail segment net sales declined 8% at Urban Outfitters and 12% at the Anthropologie Group, while rising 1% at Free People. Again, wholesale segment net sales dipped 1%.

In the year-earlier holiday period, the company registered growth of 2.9% in total net sales and 3% in comparable Retail segment net sales.

Furthermore, total net sales fell 14.3% from the year-ago period during the eleven months ended Dec 31, 2020. Also, comparable Retail segment net sales decreased 12% on negative retail store net sales stemming from mandated store closures induced by coronavirus and lower productivity after stores reopened. These were offset by solid double-digit growth across the digital platform. Similarly, wholesale segment net sales plunged 42% in the eleven-month period.

We note that Urban Outfitters’ Retail segment comparable net sales have rebounded in January. However, management projects overall gross margins to deleverage by several hundred basis points in the fourth quarter of fiscal 2021. Gross margin will be marred by deleveraged delivery and logistics expenses on higher penetration of digital sales, carrier surcharges and expedited shipments. Higher store occupancy costs on account of negative store net sales will further hurt the metric.

What Else?

Management also added that the Urban Outfitters Group’s CEO Trish Donnelly will leave as of Jan 31, 2021. Sheila Harrington will be the CEO for both the Urban Outfitters Group and Free People Group. Also, the Urban Outfitters brand’s present chief merchandising officer Gabrielle Conforti is promoted to the position of president of Urban Outfitters North America. Meanwhile, Emma Wisden will continue to be the managing director of Urban Outfitters Europe, and will also manage the Urban Outfitters brand’s Wholesale business. Both Conforti and Wisden will be reporting to Harrington.

Markedly, Urban Outfitters remains committed toward store-related endeavors. During the eleven months ended Dec 31, 2020, it introduced 18 retail locations including six stores each for Urban Outfitters, Anthropologie Group and Free People Group. The Free People stores comprise two FP Movement outlets. In the same period, the company shuttered six retail locations which include four Urban Outfitters outlets and one store each for Anthropologie Group and Free People. Also, six franchisee-owned stores were shuttered including four Urban Outfitters stores, one Anthropologie Group store and one Free People store.

Consequently, the Zacks Rank #3 (Hold) company operated 250 Urban Outfitters stores in the United States, Canada and Europe; 236 Anthropologie Group stores in the United States, Canada and Europe; 149 Free People stores in the United States, Canada and Europe; 11 Menus & Venues restaurants; and one Urban Outfitters franchisee-owned store, as of Dec 31, 2020.

3 More Retailers’ Holiday Sales Reports

L Brands witnessed comparable sales increase of 5% for the nine weeks ended Jan 2, 2021. It has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Zumiez (ZUMZ - Free Report) , which also flaunts a Zacks Rank #1, reported comparable sales growth of 1.7% for the ten-week period (ended Jan 9, 2021).

Tilly’s (TLYS - Free Report) total net sales jumped 3.3% to $148.7 million during the holiday shopping period — the nine-week period ended Jan 2, 2021. It carries a Zacks Rank #3.

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